The eCommerce market has increased dramatically worldwide in the last couple of years as more and more businesses and consumers turn to online marketplaces. The US Census Bureau reports a 6.6% increase in eCommerce retail sales from 2020 to 2021. This market is set to topple $1 trillion for the first time this year and continue to grow in the years to come. Improved access to digital business tools and marketing platforms has allowed new entrepreneurs to enter the digital marketplace successfully and competitively. Though it is easier than ever to set up an online store, the physical location of your business is essential and can impact the way you set up and manage your startup. While digital entrepreneurship continues to rise across the country, a recent study by Nexcess explores the best states to launch an eCommerce business based on their policies impacting new businesses. The general findings of the study rank all US states by four factors that are essential for a successful eCommerce operation:
Tax Climate Score
A state’s tax climate can be a strong incentive for entrepreneurs to relocate. But, conversely, a state’s tax policies can impact scalability, profits, and investments in a new startup.
- Corporate Tax Rank
- Individual Tax Rank
- Sales Tax Ranks
- Unemployment Insurance Rank
Florida ranked the highest in the Nexcess report due to its score of 10 in the tax climate category. The state not only has one of the lowest tax burdens but has increased tax refunds and reduced corporate income tax rates in the last several years.
Economic Outlook Score
A state’s economic outlook can offer insight into the opportunities to scale within the state. Availability of a skilled workforce, history of business stability, and state policies for small businesses can provide many advantages for startups seeking affordable opportunities to scale.
- Job Growth
- Five-year New Business Survival Rate
- Small Business Policy Index (SBPI) Rank
According to the Nexcess study, Texas ranked the highest in the economic outlook category and four overall. The Small Business Policy Index ranks the states based on their policies and costs affecting small businesses and entrepreneurs. These policies impact the amount of risk-taking entrepreneurs are willing to take on, impacting economic growth and job creation. Hawaii ranked worst in the economic outlook, having lost jobs from 2020 to 2021 and ranking the lowest for several key tax rates influencing small businesses.
Financial Resource Score
Access to funding is essential for small businesses to succeed in their states. The financial resource score can help entrepreneurs find the states that may be the most willing to fund their new business.
- Venture Capital Rank
- SBA Loan Availability
Colorado scored a perfect 10 in the financial resources category; Nexcess reports, “political organizations like the Venture Capital Authority and active funds like The Greater Colorado Venture Fund and FirstMile Ventures continue to support access to capital for the state’s entrepreneurs and startup businesses.” Resources like these are essential for new business owners searching for investments and funding. Unfortunately, West Virginia scored the lowest, with zero small businesses receiving SBIV program funding since 2018.
Of course, reliable and fast internet connections are essential for operating a successful eCommerce business. However, the physical infrastructure of a state is also critical to your success. Without a strong infrastructure, your products and services may not make it to the consumer, and you may experience delays in shipping.
- Internet Access
- Power Grid Reliability
- Road Quality
- Bridge Quality
Nevada ranked a 10/10 for infrastructure, with the best access to broadband at speeds over 1 gigabit per second. Nevada also ranked high for its bridge quality and power grid reliability. Unfortunately, West Virginia once again came in lowest, with nearly 99% of the state without access to providers offering high-speed internet and infrastructure in “structurally deficient condition.”
There is more market opportunity than ever before for entrepreneurs to launch successful online startups. Understanding the state policy factors that will impact your small business may influence you to establish your new business in a more advantageous location.